KUALA LUMPUR, Malaysia (July 6): Given rising global oil demand and supply, PublicInvest Research has maintained its “overweight” call on the oil and gas sector, with the assumption that oil prices will rise to US$80 per barrel. Oil prices have risen by more than 70% in the previous year, from roughly US$40 per barrel in mid-June 2020 to more than US$70 per barrel, because to confidence about the loosening of Covid-19 limits for some of the world’s top countries, according to the report.
According to the research firm, the lack of response from shale producers has resulted in higher prices, which have been exacerbated by the Organization of the Petroleum Exporting Countries and its Allies (OPEC+aggressive )’s output cuts, which have resulted in faster drawdowns of global oil inventories.
Oil prices are expected to average about US$70-US$75 per barrel this year, based on current industry fundamentals.
“At this pricing, we expect the oil majors will be enticed to raise expenditure in line with the global economic recovery and reduction of Covid-19 instances, resulting in more large work orders available in the market.”
“This will be favorable for oil and gas service providers,” it stated in a sector update report today, “although the Movement Control Order (MCO) 3.0 might possibly provide some near-term issues in terms of project execution.”
The research group also believes that oil demand is on pace to rebound, with complete recovery projected in 2022, especially when most long-haul flights, which use more fuel, resume.
It predicted that the resumption of international travel and the availability of quarantine-free vacations abroad would boost jet fuel demand significantly.
Nonetheless, the speed with which Covid-19 is contained in Southeast Asia is critical to a full recovery.
Meanwhile, PublicInvest Research predicts that Petronas’ capital expenditure (capex) will be considerable from the second half (2H) of this year onwards, with work orders accessible in the market.
MCO 3.0, on the other hand, will most likely present hurdles to industry participants in terms of project execution, according to the report.
Petronas’ capital investment in the first quarter of 2021 was merely RM6.7 billion, or 16.8% of its full-year capex target of RM40 billion, representing a 21.2 percent year-on-year drop due to project delays and re-phasing of activities due to mobility restrictions./n
